Don’t Panic Because Of Facebook’s Stock Drop

Don’t Panic Because Of Facebook’s Stock Drop
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Facebook’s stock dropped 19 per cent yesterday after the company told investors user growth had slowed in the wake of the Cambridge Analytica breach, one of many scandals currently plaguing the tech giant (it missed revenue estimates as well).

That 19 per cent drop is equal to a $US119 billion ($161 billion) decrease in market capitalisation, “the largest-ever loss of value in one day for a US traded company,” according to Bloomberg.

If you have Facebook exposure — you can look here to see some US funds that do — you might be panicking a little bit.

Just relax. The company was, after all, at all-time high earlier this week before its grand fall (The New York Times reports that Facebook was up 23 per cent this year), and it’s still up from a year ago.

The savvy investor doesn’t pay attention to one day movements in the market, or in individual stocks. One bad earnings report doesn’t spell the end for the company.

What to keep in mind? Along with Facebook, a handful of tech stocks account for more than half of the gains in the S&P 500 this year, per the NYT. Those other tech giants are doing fine: This year, Apple is up 15 per cent, Alphabet is up more than 20 per cent, and Amazon has gained more than 50 per cent.

You can also use the drop as a reminder to diversify. Don’t keep all of your eggs in one basket or overly rely on one company or sector.

Headlines flashing Facebook’s loss are appealing, but it’s better to sit tight than do anything rash or change your financial plan. If anything, it’s a better time to buy.